The pound tumbled well past its two-year low against the U.S. dollar Monday after Prime Minister Boris Johnson said he wouldn't resume Brexit talks with the European Union until it shifted its stance of the Irish border issue.
The comments, which followed weekend reports that Johnson has asked his new government to accelerate preparations for a so-called no deal Brexit, have currency traders worried that Johnson's hard-line stance will either trigger an abrupt departure from the EU or fresh national elections that could delay Britain's attempt to leave the bloc well into 2020.
"We are not aiming for a no-deal Brexit at all. What we want is to get a deal and I've had some interesting conversations with our European partners," Johnson told reporters during a visit to a nuclear plant in Scotland. "I've talked to Jean-Claude [Juncker] and Angela Merkel and we're reaching out today to (Ireland's Prime Minister) Leo Varadkar. The feeling is, yes there's no change in their position, but it's very, very positive."
"They all know where we are: we can't accept the backstop, it was thrown out three times, the withdrawal agreement as it stands is dead and everybody gets that," he added. "But there is ample scope to do a new deal and a better deal."
The pound was marked 1.33% lower on the session at 1.2222 against the greenback, the lowest in more than 27 months and a move that extends its three-month decline to around 8%.
Johnson's spokesperson told reporters in London Monday that "the Withdrawal Agreement with the backstop has not been able to pass parliament on the three occasions it was put in front of parliament," referencing the agreement ousted Prime Minister Theresa May brokered with Brussels last year. "Therefore it needs to change."
"The prime minister would be happy to sit down when that position changes. But he is making it clear to everybody he speaks to that that needs to happen," she said.
Johnson, who was chosen to replace May by members of the ruling Conservative Party last week, has repeatedly insisted that he will take Britain out of the EU "come what may" when the extended Brexit deadline expires on October 31.
Britain has remained mired in internal conflict since the June 2016 referendum, unable to reach terms with the EU that both protect Ireland's border with Northern Ireland, a U.K. territory, and allow Britain to sign independent trade deals.
The thrice-rejected Withdrawal Agreement had attempted to find a way through the impasse, creating what is now known as the 'backstop", a clause that prevents a hard border between Northern Ireland and the Republic while the UK and the EU hammer out a future political and trading relationship.
If those talks fail, the EU has insisted that the UK cannot put a hard border in place, as it would violate terms of the 1998 Good Friday peace deal. Johnson, however, has argued that this unilateral demand is not only undemocratic, but it would also keep Britain in a so-called Customs Union with the EU, preventing it from inking trade deals with other nations, including the United States.